Home economics: answering your property questions
Advice from our property expert for 'last-time buyers' who want to downsize and on the potential fall out of a 'life loan' which released equity in a parent's house.
Question: We live in a large house which is quite old and expensive to maintain. Our children are gone and we are thinking of moving but definitely do not want a poky flat. We want somewhere comfortable where our grandchildren might stay. The house is worth about €700,000 but we would want to keep some money for savings. What advice should we get?
Sinead replies: We spend lots of time talking about first-time buyers, but there's a burgeoning market for 'last-time buyers' just like you. Indeed, many of the cash sales in the property market, particularly at the luxury apartment level, is aimed exactly here. They are not mortgaged and are prepared to pay for space. With an estimated 120,000 'empty nesters', many are seeking to trade down to a more manageable home.
The first thing is to get a valuation. Use at least two local estate agents (perhaps one already selling on your street). Then decide where you want to live - many older people like to stay in an area, so you'll need to look around.
Deciding what home type you want - house, apartment, duplex - is next. Be open minded. You're leaving a spacious home - everywhere will seem poky initially, so bear that in mind.
Build in around 2pc-3pc of the sale price in extra fees and you may want to give it a lick of paint before selling.
Finally, consider renting initially. Buying and selling simultaneously is difficult and stressful.
For an apartment, you could rent a similar one for a few months and see if it's for you. Some sellers may be happy to let you have a 'trial run' and deduct the rent off the sale price.
Question: I heard on the radio about loans older people took out years ago by releasing equity in their homes which weren't paid back until they died.
I discovered to my horror, that my mother effected one of these to help my brother with the deposit on his house. My sister and I had no idea, and now worry she's in a lot of debt. My brother sold up the house and moved abroad. How do these loans work and can we pay it back before it gets out of hand?
Sinead replies: Life loans were popular in a booming property market, and aren't sold now. With house prices crashing, these rolled-up loans (there are no monthly repayments) were usually at higher fixed compound interest rates and not repaid until the death of the borrower.
The first thing to do is contact the lender for current details. How much is owed and is there a capacity to repay it now (there may be a penalty for doing so), say by your mother selling up and moving somewhere smaller? While the loan will continue for her life, it may be that when it is realised, the property is no longer worth the value of the loan and that could cause problems, not to mention losing your inheritance.
The second issue is your brother. I'm not suggesting your mother was under duress, but if you believe there was undue influence involved in the loan, you should contact the solicitor who acted for her at the time, says Susan Cosgrove of Cosgrove Gaynard Solicitors.
"Obtain a copy of the loan/mortgage documentation and the file notes of all meetings with your mother and advice provided.
"Did your mother have independent legal advice from your brother and was the severity of the cost of such a loan against alternative products explained to her? If not there may be a question mark over the adequacy of the advice."
A failing here would be a matter for the Financial Services Ombudsman. You may want to involve your brother and get his point of view - if your mother and he are happy with the arrangement, however, there's not really anything you can do, although future inheritances might be discussed as a family.
The Ryan Review
There may be no property out there, but that hasn't stopped anyone buying.
Several reports out from estate agents show prices in the executive apartment market as strong as ever. Dublin's Docklands specialist Owen Reilly shows values up seven per cent in 2015, with average sale prices of €379,000, giving respectable rental yields of 5.8pc to investors, many foreign.
REA found 16pc of its sales from US buyers, emigres coming home to work, retirees returning to their roots or plain vanilla investors attracted by the market and boosted by a strong dollar.
A Eurostat report landing at the same time shows Ireland stubbornly with the third highest price index across EU members between Autumn 2014-2015.
But while there is still money to be made, investors will find value in high-end, easily rented executive properties in the city, preferably overlooking water.
Just where that leaves the lowly average-waged worker bee, or worse, student, is at the lower end of the market, where supply is tighter than the proverbial duck's behind.
'Twas far from plush penthouses we were brought up, but that seems to be where the demand is.
Just how long that can tip along at a profit though is moot. Might 2016 be the leveller?